The discussion revolves around the concept that a mortgage is not just a debt but an essential investment tool, particularly in real estate. Kevin and Steve explore how mortgages are often seen negatively due to societal norms and historical perspectives, like the notion that debt is inherently bad. They argue, however, that a mortgage, when viewed as a financial instrument, can be a powerful lever for wealth creation.
Steve emphasizes that many people see mortgages as liabilities because they are technically debt instruments on a balance sheet. However, he suggests reframing this perception by recognizing that mortgages, especially 30-year fixed ones attached to single-family homes, offer unique opportunities for individual investors. These loans allow for leverage, enabling investors to use less of their own resources while maximizing potential gains through real estate appreciation.
Kevin introduces the idea of comparing a mortgage to a musical instrument, where the real estate is the musician. Just as an instrument needs a skilled musician to create beautiful music, a mortgage needs the right property and market conditions to unlock its full potential. The wrong property can make the mortgage a liability, but the right one can turn it into a significant asset.
They also discuss the idea that the limitations placed on the number of mortgages an individual can have (typically ten) might be a way to keep the most valuable financial instruments scarce. This scarcity is likened to a limited deal at Costco, where the value is so high that it's restricted. They note that while banks and the government use leverage to increase their wealth, the average person often overlooks the opportunity to do the same with a mortgage.
The conversation touches on how inflation impacts the value of mortgages, where fixed-rate mortgages allow investors to benefit from rising rents and property values while their mortgage payments remain constant. This creates an inverse relationship where the debt decreases as the property's value and income potential increase.
Ultimately, the discussion highlights the importance of understanding the rules of the financial game and how to use tools like mortgages to participate actively in wealth creation, rather than being passive observers.
Chapters
0:00 Intro
3:20 Is the mortgage or property the investment?
13:50 Utilizing a financial instrument
19:14 Micro-Winning the game
28:35 Hey, Siri...
31:51 Ice cream
00;00;02;04 - 00;00;06;16
Kevin
All right. Well hello, everybody, and welcome to replace your return. Come with Kevin and Steve.
00;00;06;16 - 00;00;07;02
Steve
How's it going, Kev?
00;00;07;03 - 00;00;16;02
Kevin
Hey, man, we're back in the studio. Hey, can I tell you what? The studio was used just a little bit earlier today for? Yeah, it was used as a rehearsal hall.
00;00;16;04 - 00;00;17;09
Steve
Did you know that? No, I did not.
00;00;17;12 - 00;00;37;14
Kevin
Well, my 13 year old son is trying out to be Joseph in Joseph in the Amazing Technicolor Dreamcoat that they're doing at the junior high. And he said, he called me. He said, dad, can I come to your office and practice for my audition? And I was like, we have a studio. So this is now both a podcast studio and a rehearsal hall.
00;00;37;14 - 00;00;38;09
Kevin
Let's go.
00;00;38;11 - 00;00;39;22
Steve
Which. Which son?
00;00;39;24 - 00;00;45;04
Kevin
Braxton. Yeah, the one who just did talk art at at at Talk the Block.
00;00;45;04 - 00;00;46;09
Steve
Braxton is amazing.
00;00;46;09 - 00;01;04;14
Kevin
Braxton's been on this podcast. Do you know he and I did an episode? Yes we did. So Braxton is awesome. He's an entrepreneur, okay. He's doing this play and he, he did this incredible chalk art over the weekend at Chalk the Block in Provo. And he made, like, this whole comic and an eight by eight parking spot.
00;01;04;14 - 00;01;31;07
Kevin
It was really, really cool. But one of the things that I love and this is actually, you know, on this podcast, Steve, and today's topic is, is no different than any of the other podcast episodes, because we are going to talk about something and we're going to treat it sort of very differently, that I would say that, like the mainstream wisdom would treat a thing, but why that's applicable to my son Braxton is what he does, all this cool stuff, but he's not, like, super duper athletic, right?
00;01;31;13 - 00;01;41;29
Kevin
We I wrote a story about him and his athleticism in our book, Micro Wins to Millions, which, by the way, we need to get a copy of it and like put it on the table for YouTube. What are we doing?
00;01;42;00 - 00;01;44;00
Steve
Why have we not done it? I don't I don't know.
00;01;44;03 - 00;02;06;28
Kevin
Oh, Justin's going to go get it. Good. because I mean, that just needs to be in the shot to remind everybody it exists. But what I told him is I was like, Brax, you know what, dude? There's a lot of people your age and all. They care about is, like, sports and, like, whatever. How many are doing, like, masterpiece chalk art and and trying out for Joseph in the eye and coming on a podcast to talk about your entrepreneurial desires.
00;02;07;05 - 00;02;32;11
Kevin
And the reason why that's applicable is I hope that everybody listening understands that you definitely do not have to be like the rest of the world in fact, by being different than the rest of the world, you're likely going to be more successful. There's a quote that I love by Rollo May, who was quoted inside of the strangest secret that Earl Nightingale did, and he says that the opposite of cowardice.
00;02;32;11 - 00;02;51;06
Kevin
Wait. The opposite of courage in society is not cowardice, it's conformity. The opposite of courage in society is not cowardice, it's conformity. Oh, there we go. Look at that. Let's, let's zoom in on the book. Micro wins to millions. Can you get in that camera right there? You get it.
00;02;51;08 - 00;02;53;08
Steve
Right. Oh, I like how your fingers covering my name.
00;02;53;08 - 00;03;10;28
Kevin
Oh. Oops. and then let's do this camera. There we go. See, we just need two of them so that they can always be in the shot. I'm just going to leave it, like in the middle here because, guys, micro wins to millions. The physical book is now in our fingers. And the official launch of micro instantly it's going to be coming up real soon, so stay tuned.
00;03;10;28 - 00;03;12;09
Steve
Right, Steve? I'm excited about it.
00;03;12;14 - 00;03;33;00
Kevin
It's going to be awesome. Well, listen, if the opposite of courage in society is not cowardice, but conformity, we are going to talk about something today that is absolutely the opposite of conformity. Because, Steve, we love to talk about real estate through a different set of lenses. We love to have a shift in perspective. I think that everybody listening appreciates that.
00;03;33;04 - 00;03;51;24
Kevin
And last night we did a webinar with a friend of ours. He's a he's a client of ours, actually. He's a friend. His name is Ryan Lee. He spoke at our intensive. We did a webinar for those that attended the intensive so that they could learn how they could start to work with him. He is a brilliant, guy, brilliant financial mind, prolific real estate investor.
00;03;51;26 - 00;04;09;09
Kevin
And he said something in the webinar last night that kind of set my non-existent hair on fire. And I haven't been able to stop thinking about it. Then you and I have been talking about it all today and sort of like tap dancing around the topic, because we're trying to make sense of is the statement that he used does.
00;04;09;11 - 00;04;31;28
Kevin
Is that real? Does it make sense? How do we feel about it? And we started to have this discussion. We thought, let's bring it to the podcast. So here is the statement that he said, and this is what we're going to begin the discussion on today. It's this he said the mortgage is the investment now. Now, the reason why I said that is we're talking about real estate.
00;04;31;28 - 00;04;52;21
Kevin
And we were talking about the value of leverage, both inside of real estate and inside of a financial vehicle like life insurance and how valuable a mortgage is when trying to wealth build. Right. And did you take the book? Justin took the book away. He doesn't like the book anymore. Is it was it was it covering my face or cover you during the short?
00;04;52;23 - 00;05;14;20
Kevin
Oh, I get it. Okay. We don't want to cover my face. Is the moneymaker right here, right. so he he he was talking about it in terms of, like, leverage and the mortgage being such a powerful piece of the wealth equation. And we have an entire chapter in micro wins to millions about leverage and the value of leverage.
00;05;14;20 - 00;05;40;21
Kevin
But nonetheless, Steve, you and I are both, I think, totally in agreement that people still look at mortgages through a lens of limitation. It is always like, oh, what's the interest rate? And oh, I'm going into debt. No, the and we have wailing and gnashing of teeth when it comes to a mortgage. But if we were to step back and, and look at the mortgage as an investment, what would that do to our brain?
00;05;40;21 - 00;06;02;05
Kevin
We'd have to look at it as a financial tool more than just this, this, this, you know, painful debt that we're sort of like, shackled to for 30 years. So what I as we kind of begin this discussion, if I say if Brian said that phrase, if I say that phrase to you, the mortgage is the investment, what's the thought process that begins for you?
00;06;02;11 - 00;06;31;11
Steve
Well, I think I think most people grew up in a world, in a society, in families where debt is bad and you shouldn't have it. And, and, and in a world where it was parents were just always or and grandparents probably even more so because they went through the Great Depression. It's like debt is bad and we got to pay off our mortgage, our home mortgage, as fast as we can because that's the security blanket that I want to have.
00;06;31;14 - 00;06;57;02
Steve
And so it's kind of like mortgages are this like this bad thing. Yeah. And so and so like I think generally speaking even in today's world, like that's kind of how people look at, you know, mortgages and and lending. And so we've been, you know, talking for years and years about the power of leverage. And the only way to leverage is to get a mortgage.
00;06;57;04 - 00;07;24;23
Steve
And so if you kind of twist that or flip that on its head that it's a debt instrument, like that's the technical term for it. And I love I love the term. It's an instrument that we get to use. And and so most of the world looks at, at a mortgage as a, like a liability. And even like from an accounting in the accounting world, it falls on the liability side of, you know, of a balance.
00;07;24;25 - 00;07;49;29
Steve
statement. Yeah, we're about sheet. And so like that, that is something that I think if we can really reframe that conversation and reframe how we position and look at what a mortgage is in terms of the power that it actually gives us in conjunction with the right type of real estate. Because remember, there are different types of mortgages, right?
00;07;49;29 - 00;08;17;27
Steve
There's different types of loans, and you can only get the most advantageous loan in connection with a single family residence. Yes. You can't get it on unlike large multifamily, you can't get it on commercial. you typically can't get it on land. The terms are just different, right? All of a sudden you go from 30 years to typically with a commercial loan like 20 years and higher interest rates, and it's more expensive.
00;08;18;03 - 00;08;46;29
Steve
So make no mistake of when you purchase a property, you're purchasing the property, right? And, and and in our world, in our vernacular, in, in the world, in in our understanding typically it's like that is the investment. But the reality is you're also purchasing a loan. You've got closing costs, you're paying points, you're you're paying an interest rate for the privilege of owning literally owning this.
00;08;47;01 - 00;09;14;17
Steve
I'll call it investment vehicle or debt instrument. It becomes an instrument by which you can own and leverage this property, which makes this property this single family home. It's it's potential result the most powerful it can be. And that's why when that went, I don't know how many years ago it's been when Warren Buffett said, hey, if I could go out and buy, you know, a few thousand single family homes using leverage, I would do it today.
00;09;14;19 - 00;09;24;02
Steve
Back then, the the ability to do that just it didn't exist. Now, now we've got, you know, you know, hedge funds and so on that they're trying to do.
00;09;24;02 - 00;09;25;13
Kevin
That's a big piece of what they're doing now.
00;09;25;13 - 00;09;58;01
Steve
But like the hedge funds, they aren't using the 30 year fixed. Oh right. They're using a different instrument to purchase those properties. And so the benefit is that that this the mortgage is designed and it is is something for the individual investor. Like like yeah. You know a regular for every game, every man every person. And so I think that it's important that that we really understand that collectively these two things become one of the most powerful investments on the face of the planet.
00;09;58;01 - 00;10;28;10
Kevin
So it was really interesting to me when he said that the mortgages, the investment, and I think effectively what he was saying is all of the power. So. Okay, so the way that I understood that was real estate in, of and by itself is a wealth generator. Wealth creator, powerful investment. But to unlock the full wealth growth potential, you use leverage, right.
00;10;28;13 - 00;10;48;28
Kevin
And because you are using less of your resources, more of somebody else's resources, but you're still gaining all of the upside you own all of the upside, but you're using the majority of the money belongs to somebody else, not you. And you're not even the one paying it back. In theory, if you have tenants that are paying it back.
00;10;49;05 - 00;11;15;07
Kevin
So I think that what he was saying was the mortgage is the investment. It is the concept of the mortgage is what unlocks the full power and potential of the real estate. But I had this other thought, as you were talking about a debt instrument. And and so as soon as you said instrument, I started to think about instruments and I I'm, I don't play an instrument, you know, my, my son plays drums.
00;11;15;09 - 00;11;34;06
Kevin
my other son wants to play guitar and my daughter plays piano, and, I think of, like, school bands and I think of instruments, like, if you walked into a band room and there was a bunch of instruments lying around, those instruments don't produce beautiful music by themselves. They require something in order to make the instrument produce the beauty.
00;11;34;06 - 00;11;55;07
Kevin
Right. And and there may be some musicians that are better at producing beauty with the instrument, and some that are less is good. And so when you started to talk about instrument, I went, oh my gosh, didn't click. The real estate is the musician, the mortgage is the instrument, right. And but now that means that you have to go and find the right kind of musician.
00;11;55;07 - 00;12;21;06
Kevin
Right? The musician that can fully, that that can fully maximize the potential and the beauty that comes from the instrument. So if we were to put that into real estate terms, not all property is created equal, right? because if you were to go and use a debt instrument like a mortgage and you were to get the wrong property in the wrong market with the wrong set of conditions, it does become a liability and an expense.
00;12;21;13 - 00;12;55;29
Kevin
And now all of a sudden, while it's still an instrument, it's it's playing. It's, you know, it's it's out of tune and it sucks. But if you get the right property in the right market with the right set of conditions, now all of a sudden it's able to make that instrument, sing beautifully. And I think so that was part of kind of what was going through my head as we started this conversation today when you said debt instrument, I was like, okay, so maybe that's the understanding that the mortgage is the investment, but in and of itself, a mortgage that the mortgage by itself in isolation is not necessarily a mortgage.
00;12;55;29 - 00;13;12;22
Kevin
Now might be, if I, if I was, you know, maybe you could look at it as like if I'm a hard money lender or something, right? I maybe all I'm doing is I'm lending money and I'm hoping to get it back, and maybe somebody's going and getting a mortgage. And maybe somehow that's how a mortgage in isolation is an investment.
00;13;12;22 - 00;13;42;13
Kevin
But even then it's like the it's it's the instrument. So I think if the mortgage is the debt instrument or a financial instrument, I even like the term financial instrument better than debt instrument, because we have so many negative associations with the idea of debt. So if we were to sit back and say mortgages are financial instruments for wealth creation as opposed to I get a 30 year fixed with an interest rate and I have to pay a bunch of points and I've got this liability.
00;13;42;15 - 00;14;23;13
Kevin
All we're doing is we're just shifting the entire conversation. And one of the things that I love about that shift is the other idea that Ryan pointed out, and that you and I have talked about, that I don't know that that we've fully explored, and I'm sure we have another podcast. But when we look at the idea of utilizing a financial instrument like a mortgage in conjunction with the musician of the real estate of the right property, right market, right set of conditions, what happens is we are now locking in our interest in that financial instrument, and while the rest of the world goes crazy, right, rents increase stuff costs.
00;14;23;13 - 00;14;41;24
Kevin
You know what? We're paying 40% more, you know, at the pump and at the grocery store than we were four years ago or whatever it is now as inflation continues, guess what? The rates that we have on our mortgages, Steve? How much have that? We don't we don't do adjustable rate mortgages. We have fixed rate mortgages on our properties.
00;14;41;24 - 00;15;09;25
Kevin
So the interest rates that we locked in on a 30 year term in this financial instrument, those interest rates are the same. Our payment doesn't change, but rents go up and the rest of the world goes crazy. And as our dollars become less valuable, we are basically trading less valuable dollars in the same quantity, but gaining all of the financial upside of the rest of what's taking place with inflation.
00;15;09;25 - 00;15;12;00
Kevin
Am I articulating that right? Exactly.
00;15;12;03 - 00;15;34;08
Steve
I mean, that's the beauty of of this. I'll call it instrument. I love that, of this instrument of, of a mortgage is when you get the right one, it does, it stays fixed. But this but it's attached to this home. Right. And so collectively, like that's what makes this investment so good, so powerful, for the individual person.
00;15;34;11 - 00;15;57;11
Steve
And so the value of that property continues to go up. Right. in, in accordance with inflation and everything, all of the economic conditions, supply, demand, the whole thing. But that loan stays steady. That's the consistent factor. That's the thing that's created this value. Because as your rents go up, does your payment, does your does your interest go up?
00;15;57;11 - 00;16;01;26
Steve
No it doesn't. You may have some increase in taxes or whatever. But yeah.
00;16;01;26 - 00;16;02;17
Kevin
But.
00;16;02;20 - 00;16;23;21
Steve
But the but your interest rate stays fixed. Yes. And so over time your cash flow can increase dramatically as well as the, the value of the property. So the value of the property's going up and the debt portion of this instrument is going down every single month. So you got this. You know.
00;16;23;21 - 00;16;24;26
Kevin
It's an inverse relationship.
00;16;24;26 - 00;16;39;10
Steve
This inverse relationship happening. One of the other things that I just had, the thought is what is really interesting is generally speaking, the general population doesn't think in these terms. Right. Yeah.
00;16;39;12 - 00;16;42;26
Kevin
And I unless they listen to the Replace Your Income podcast.
00;16;42;29 - 00;17;03;08
Steve
That's right. But I but I wonder if that's kind of by design by the powers that be. I don't know, I'm not a conspiracy guy, but I just think from the standpoint of it's kind of like, you know, when you go to Costco and they have like some item and it's they have a reduced price, but you're limited to ten.
00;17;03;09 - 00;17;21;27
Steve
Yeah. You only get to have ten of these because the deal is so good, right? That, you know, I don't know if it's because they don't want to rent out or maybe that creates more demand or I don't know why they do that, but they limited. And it's kind of the same thing in real estate that those who are making the rules are saying, hey, and by the way, you guys don't even know how good of a value this is.
00;17;21;29 - 00;17;34;10
Steve
But we do. And so we're going to limit you to the number that you can put on your credit. Yeah. Now there are other creative ways that you can get them get, you know, buy more properties. But they limit the number of mortgages.
00;17;34;10 - 00;17;35;07
Kevin
Yeah.
00;17;35;09 - 00;17;56;17
Steve
The 30 year fixed most valuable mortgage that is attached to a single family home that you can only get in this combination because in a different combination you don't get it anymore. But in this combination you only get ten on your on your credit. Right. You know, only allowed ten on your credit. I just find that really interesting kind of a thought that I just had.
00;17;56;18 - 00;17;57;07
Steve
As we, as we're.
00;17;57;07 - 00;18;23;08
Kevin
Sitting here, I've never I've never thought about that. you know, I do. I will say that I think that by and large, regardless of the party, the federal government usually tends to be in business for themselves and not for the average American. Right. And so, I don't know why that is. I have no idea. But but what we're constantly trying to do is figuring out a way to navigate those waters.
00;18;23;13 - 00;18;50;16
Kevin
And I think that you're right. I've never thought about that. Like limit ten. but it's true. It's like, this is the greatest financial instrument wealth creation instrument that exists in conjunction with this physical single family property. And they're saying, hey, listen, if we're going to create an environment where you can only have ten of them because, you know, they're insuring the mortgages through Fannie, Freddie, or, you know, whatever, whatever it is.
00;18;50;18 - 00;19;14;16
Kevin
and so, there is some scarcity that exists there, but it's our job, just like the tax code to say, okay, how do we utilize it to our benefit knowing that it exists, understanding that the rules of the game and the federal government literally changes the rules, like every single year, every single administration. But if we understand the rules of the game and we can operate inside of those rules, we have a chance to.
00;19;14;23 - 00;19;39;29
Kevin
We don't have to win the game above everybody else. But if we can have a positive, winning experience, we're micro. Winning our way through the game, understanding the rules. And I think that the mortgage as a financial instrument, in conjunction with the musician of, you know, the single family residential real estate, if we can work within those limits and within those rules, there is wealth that can be created.
00;19;40;04 - 00;20;05;08
Kevin
And what's interesting about that, Steve, is like, look, we we talk about this, but okay, like, let's just pause for a moment. How does if we were to make if we were to say that the federal government creates wealth? They don't create wealth for us. But how does the federal government become wealthier? Okay. What do they do?
00;20;05;10 - 00;20;06;00
Steve
They tax us.
00;20;06;00 - 00;20;29;24
Kevin
A tax us. Now, in order for the government to become wealthier, they have to collect more taxes. And you collect more taxes in two ways. You either continue to punish the people that are already generating revenue for you, or you create an environment where more people are paying into the pie, regardless of how it is. That's how the federal government is going to create wealth or sort of increase the pie.
00;20;29;29 - 00;20;43;14
Kevin
How the banks create wealth. Well, banks create wealth by also taking money from you, right? You deposit it, they give you a little safety net. And then what do they do with the dang money?
00;20;43;17 - 00;20;43;29
Steve
They don't.
00;20;43;29 - 00;21;07;27
Kevin
Leverage it. They go and leverage it. So the government is leveraging the taxpayer okay. And what does the government do. They take that money and they make investments in this that or the other. Right. So the government leverages us. The banks leverage us. We're the only people that think it's somehow bad to leverage something else in order to create wealth.
00;21;08;04 - 00;21;27;02
Kevin
Why? Because we are the ones that are constantly being leveraged. And so this whole game, if the mortgages, the investment, all that means is the mortgage teamed up with real estate. This financial instrument teamed up with this musician of real estate. It's allowing us to get in the game and start to play with. Those are rules that exist for us.
00;21;27;07 - 00;21;41;20
Kevin
We may have a limitation on how we can play inside of those rules, but the average American is sitting back and just observing the game and wondering why they're never winning. They're not even getting in the game. They're not even playing with whatever is available on the table for them to play with.
00;21;41;21 - 00;22;12;07
Steve
And that's the key. Kev is understanding the rules of the game, understanding what are the valuable, components of the game. Like what are the things that you want to control, what are the instruments you want to control and how to control them to to make the most of them? Because regardless of how one might think of the federal government or anything like that, the reality is, is, is they have provided a lot of good opportunities in terms of what we're able to do.
00;22;12;08 - 00;22;31;15
Steve
The thought that I'm having is that we need to do what you just said be in the game, get in the game, understand the rules, and and take advantage of them. Like you never want to cross lines or do anything that you know breaks the rules because it's just not worth it, right? Or whether the rules are right or wrong.
00;22;31;18 - 00;22;55;04
Steve
It's our job. It's our opportunity to play within the rules, the guidelines that have been established which are constantly changing. Yeah. And and, and and taking advantage of them because the rules are being made by those in the most powerful positions. And sometimes they make the rules in such a way that it benefits them. And them as individuals if they made the rules.
00;22;55;11 - 00;23;13;23
Steve
And maybe they're they're not advertising all of the rules and the opportunities. Well, we can go in and find them just as well as they can. They're the ones that created them. And you hear that all the time for people who are running for political office, and they get bashed for for having done something, it's kind of like, well, wait a minute, I didn't make the rules.
00;23;13;23 - 00;23;32;13
Steve
You did? Yeah. You the government made the rules. I'm just following them and I'm making the most of them. So, you know, you can't blame me for that. Right. And so it's the same thing with us, right. And but it's under standing not just the rules of the game, but having the right perspective in how to utilize them to our best advantage.
00;23;32;13 - 00;23;50;03
Steve
And that's why I love this idea of understanding that a mortgage, which is a financial instrument in conjunction with the right type of real estate, you combine those two together in the right way and you can do some really cool things.
00;23;50;03 - 00;24;14;10
Kevin
You know, just thinking about this analogy of like the instrument, the musician making the music like, and then just talking about the game and playing the game and like being in the game, like in basketball, which, you know, I love to relate things to basketball. Football is my favorite sports. Like if I got in the basketball game, if I was playing a basketball game and I have my uniform and I'm off the bench and I'm on the court, but I never touch the basketball.
00;24;14;13 - 00;24;29;04
Kevin
If my entire team never touches the basketball, every time it comes near us, we put our hands up and we say we're not going to touch it. And we let everybody else that we're playing against touch the basketball. Who's going to win the game, right? We may say, oh yeah, but I'm doing a good thing because I'm in the game.
00;24;29;04 - 00;24;48;29
Kevin
Listen, you still got to touch the ball right. And so I think for wealth creation for average Americans, you still have to pick up the instrument. You still have to grab the ball. If you're going to go ahead and do something that's going to allow you to win the game. And, you know, this whole concept of money is so fascinating to me.
00;24;49;01 - 00;25;07;02
Kevin
And it was I was having a conversation yesterday about this. And, you know, well, I had a conversation with way with my son, actually, my, my ten year old said something to me. So out of the blue, I don't even know where it came from. We were, I think I was like, cleaning up from dinner. And he's like, dad, do you know how to tell if if, if, money is real?
00;25;07;02 - 00;25;23;22
Kevin
And I was like, what do you mean? He's like, well, and I don't know if this is true or not. He's like, if you if you shine it under a black light and it glows, it's not real. But if it doesn't glow, it's real because it's on cloth. And I was like, oh, cool. He knows that money is printed on cloth, not paper.
00;25;23;29 - 00;25;44;24
Kevin
And so we just started to have a discussion and one of the things that's so fascinating to me is money. And I know we all know this, but I think it bears repeating. And we need to be reminded of this because it's all part of the concept of the game. Okay? Money is nothing more than, it's the piece that you move across the board, okay?
00;25;44;26 - 00;26;04;20
Kevin
We assign so much value to it. I mean, we literally have a company that helps people go and amass more of this stuff, but all that thing is that dang piece of paper, if that's what you hold in your fingers, it's a the piece of cloth with some really sophisticated ink on it and security measures. That is just a note.
00;26;04;24 - 00;26;34;10
Kevin
It is nothing more than a representation of value and it's not even a static. It's a somewhat static representation of value, because a $1 bill always represents 100 pennies of purchasing power or trading power. But 100 pennies is a moving target, right? It's like a dollar buys less today than it bought yesterday. That's just the reality. A dollar tomorrow was going to buy less tomorrow than it buys today, because we're in a high inflationary environment and we're always in an inflationary environment, period.
00;26;34;10 - 00;26;55;12
Kevin
Because we went off the gold standard and we print money and the and the, the dang government doesn't even print money anymore. Right? They do print some of it, but they're mostly just digitally magic king money into existence. And so when we think about it and we we assign so much value to this concept of money, but all the thing is, is that it is an it is an instrument.
00;26;55;14 - 00;27;17;03
Kevin
It is a representation of value. It is a representation of trading value for value. It's a medium of exchange. We say that all the time. Well, listen, if we're going to get in the game and we're going to play the game and we're going to use the financial instrument and go find something that plays, that can play that financial instrument and give it beautiful music, money is a piece of that.
00;27;17;06 - 00;27;36;23
Kevin
It's the game piece with which we have to play, and using a mortgage allows us to go and get more game pieces that can go on the board, that give us a higher chance of winning. If it's combined with the right set of conditions to make sure that we don't, don't lose the game pieces that we got together, you.
00;27;36;23 - 00;28;05;03
Steve
Know, give. speaking of money, it was interesting. yesterday, I was driving home in my truck and, as listen to some news and the news guy came on, he's, you know, giving kind of the highlights of the news. And then he said, oh, yeah. And by the way, Warren Buffett is about to cross the, with Berkshire Hathaway, his company that owns all the different companies that he owns.
00;28;05;06 - 00;28;31;08
Steve
It's about to cross the $1 trillion mark in valuation, which there are only seven other companies on the planet that are worth more than $1 trillion. And Warren Buffett's company is one of those. And I don't think people really get together. They don't understand, like, like what is $1 trillion like like a million, a billion and then like a trillion isn't worth it.
00;28;31;08 - 00;28;34;12
Steve
So I just wanted to I just wanted to ask Siri this question.
00;28;34;12 - 00;28;35;00
Kevin
Okay, good.
00;28;35;07 - 00;28;44;02
Steve
Let's hey, Siri, how long would it take me to count to 1 trillion?
00;28;44;05 - 00;28;57;08
Steve
Okay. She pulled it up and it says, how long does it take to count to 1 trillion? I was hoping that she would actually speak 30, 1710 years to count to a trillion.
00;28;57;10 - 00;28;59;22
Kevin
But it's crazy like that.
00;28;59;24 - 00;29;22;15
Steve
Like, that's, we can't even, like, fathom. Like, so in terms of money, I just bring that up as an interesting fact. But but sometimes, like we talk in terms of dollars, we talk in terms of, you know, having this, this, this money. And people throw around terms like billions and trillions like the government now like like when they say, oh, this thing's getting cost $100 million.
00;29;22;21 - 00;29;24;01
Steve
I'm kind of like, oh that's cheap.
00;29;24;01 - 00;29;25;09
Kevin
Oh yeah. Great. Good deal.
00;29;25;10 - 00;29;39;24
Steve
Like that's nothing. And and so they'll be like, oh yeah, our budget this year is $2.1 trillion. That would take you like almost 70,000 years to count to 2.1 trillion.
00;29;39;25 - 00;30;03;15
Kevin
That is it's insane. And I think the point that you're making, Steve, is we have to understand as consumers, as investors, as normal everyday people, that it is all a freaking game. That's the reality. We are in this game. It is up to us if we want to leverage or utilize that which is available to us, it is up to us.
00;30;03;15 - 00;30;20;22
Kevin
If we want to play the game at all, we're either going to get played by the game or we're going to play the game. That's the reality. And most Americans are getting played by the game. But how do we play the game? We can utilize something like a financial instrument, like a mortgage or a debt instrument, like a mortgage.
00;30;20;22 - 00;30;42;28
Kevin
And when we team that with the right vehicle, like real estate, that gives us all these other, we are now playing the game in earnest. We are now doing the thing that the wealthiest do. If the government is leveraging us to make money, if the banks are leveraging us to make money, why not turn around and leverage the federal government and leverage the banks?
00;30;42;28 - 00;30;59;15
Kevin
That's all we're doing. When we go get a financial instrument, we're leveraging the bank by buying, allowing them to lend us money. And we're leveraging the federal government by playing into the tax code so they take less of our money. We're still paying what we're supposed to pay, but there's so many tax advantages that come with real estate.
00;30;59;21 - 00;31;17;29
Kevin
We're literally taking the rules of the game that they've put in, that they've all put in place. And we're saying you're making all the money off us because you're playing us in the game. We're going to jump in the game, and we may not win against you guys, but we're going to win for us. And I think that that is what's so powerful about this idea of a financial instrument.
00;31;17;29 - 00;31;51;05
Kevin
And the reframe of a mortgage or mortgage debt or whatever. If we reframe it as a financial instrument, all of a sudden interest rate doesn't matter as much. All of a sudden, you know, some of these things that we worry so much about, about to as typical consumers is not as important. It's a financial instrument. And we are going to go find the right thing, the right vehicle, the right asset that can play that instrument and allow it to create beautiful music so that we can not only be in the game, but at least for us, for our family, for those who we love, we can win some aspect of the game.
00;31;51;12 - 00;31;55;27
Kevin
So anyway, it's kind of an interesting conversation. Anything you want to add before we conclude?
00;31;55;27 - 00;32;13;16
Steve
No, let it be a great conversation, something that we we talk about frequently, but even in our conversations, we haven't quite articulated it in this way. But I feel like I feel pretty comfortable with with, the way that we've described and articulated it today. So nice. Nice work today, kids.
00;32;13;17 - 00;32;23;01
Kevin
Yeah. Okay. Well thank you. I'm going to I'm going to give myself, a reward. I'm going to eat ice cream now. Okay. I'm going to go eat ice cream. All right. You want to join me?
00;32;23;03 - 00;32;26;03
Steve
yeah. We've got some of those, Trump steaks. Yeah. Drumstick.
00;32;26;08 - 00;32;27;28
Kevin
The fake ice cream that's in the car.
00;32;27;29 - 00;32;36;09
Steve
Let's go get it. Doesn't even melt. You put it on the table and it doesn't, like, melt into. You can pick it up and it's like liquid, but it's still in a bowl.
00;32;36;09 - 00;32;55;06
Kevin
Yep. That's right, everybody, if you want to do a fun experiment with your kids this weekend, go get a drumstick and leave it out for hours and watch what happens. It is some the it is synthesized ice cream RFC we'll put an end to that I think. I think that's going to be his go. All right everybody, thank you so much for joining us on replace your Income.
00;32;55;06 - 00;32;56;11
Kevin
We'll talk to you real soon.
00;32;56;17 - 00;32;59;04
Steve
Have a good one.
00;32;59;07 - 00;32;59;17
Steve
And.